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The spread of education is transforming the world. Some of the ways in which this transformation is taking place were known and expected; some have come as a — mostly pleasant — surprise. This, at its simplest, is the message of The New Wealth of Nations. But the real fun is in understanding author Surjit Bhalla’s arguments and reasoning and the consequences that he thinks will inevitably follow from the spread of education.

Massive investments have been made in education, especially across the developing world, in the last 50-odd years. Literacy rates, average years of schooling and the percentage of population with university degrees now — as compared to, say, 1950 — are impressive. And since the developed countries were already well ahead by 1950, the real change has come about in the developing world. China and India, in particular, where almost 30 percent of the world’s population lives, have taken giant strides in reducing illiteracy, opening up access to schooling and even increasing the percentage of their populations who have access to university education. It would be surprising if change at this scale did not have any consequences.

Bhalla argues that this expansion in education has altered the world in significant ways. Education is a form of investment as it provides a stream of income just as any other investment would. Hence, it should be treated as wealth. If one thinks of education this way, of putting monetary value on educational investments, the first overall impact to document would be the wealth redistribution it is causing across the world. Inequalities in material wealth have increased and might still be increasing, but if the value of educational investments and returns expected from these are taken into account, wealth distribution across the world would appear to be becoming more equal. Bhalla calculates some rough numbers on this issue and they are quite staggering, in trillions of dollars.

A provocative new book argues that the spread of education is reshaping the world

The spread of education has also allowed the supply of skilled labour to increase manifold. Bhalla uses the Lewis model — developed by Arthur Lewis to explain the consequences of labour transition between two sectors of an economy — to argue that as the worldwide supply of skilled labour increases, it puts pressure on wages. Real wage increases for skilled labour have been low in developed countries over the last decade. In addition, Bhalla hypothesises that pressure from low wages has also put a dampener on world inflation.

Gender gaps in education have also reduced substantially, even in developing countries. Though the labour rate participation of women has lagged a little, and is still low in countries such as Pakistan, it has picked up significantly and this alone is transforming economies as well as cultural and social spaces. The connection between the education of women, their labour participation and fertility rates is very strong. Demographic transition has already happened in many nations and, in some countries, fertility rates have even fallen below replacement rates. In others, it is happening or is bound to happen soon. Having more women in public spaces, especially in countries such as Pakistan, has the potential of altering social and cultural norms and values as well. The possibilities in this space are unlimited and we have only just begun to see the early results.

Education is a form of investment as it provides a stream of income just as any other investment would. Hence, it should be treated as wealth.

There can be a lot more concentration of material wealth than educational wealth. Where Oxfam has argued that the richest one percent of the world owns more wealth than the remaining 99 percent of people, the distribution of education is still fairly equal. The rich do have higher levels of education than the poor as well as access to better quality educational institutions, but even adjusting for these, the distribution of education is much more equal than that of material wealth. As education becomes accessible to more people, this distribution level is likely to become even flatter.

If education and income levels are linked — and they are in micro-level data on educational attainment and income levels (which is why education is wealth) — then the spread of education will have consequences for the class structure of a society as well. Bhalla argues that with the expansion of the middle class — and with the spread of education and rise in incomes, the middle class has grown a lot in both China and India — the composition of the ‘elite’ (however one looks at the notion of elite) will also change. This could have great consequences for societies as heterogeneous as India. Bhalla argues that previous expansions in the middle class, say with industrialisation, did not alter the structure of the elites. But as the spread of education raises numbers in the middle class by tens of millions, this has the potential to reshape the notion of ‘elite’. It will be across religions, caste, ethnicity and other established status quo groupings. This would be an interesting disruption in more settled societies.

Bhalla is provocative. He makes his arguments boldly and pushes his logic to its limits. This allows him to sometimes see startling consequences, but it also opens up space for debate and makes his writing more interesting. The way Bhalla uses empirical data is also very instructive: students could learn a thing or two from him on this count. His book is short and the arguments are expressed in simple, bold strokes. Sometimes his writing comes across a bit too breezy, but it is never superficial. He has a good sense of humour as well as knowledge of films and music, which makes reading him even more pleasurable. This is definitely a book worth reading and debating.

The reviewer is a senior research fellow at the Institute of Development and Economic Alternatives and associate professor of economics at the Lahore University of Management Sciences

The New Wealth
of Nations
By Surjit Bhalla
Simon and Schuster,
India
ISBN: 978-9386797025
224pp.